Fair Value Measurement of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value Measurement of Financial Instruments [Abstract]

Fair Value Measurement of Financial Instruments

Fair Value Measurement of Financial Instruments

Piedmont considers its cash, accounts receivable, notes receivable, accounts payable, interest rate swap agreements, interest rate cap agreements, and line of credit and notes payable to meet the definition of financial instruments. The following table sets forth the carrying and estimated fair value for each of Piedmont’s financial instruments as of September 30, 2011 and December 31, 2010 (in thousands):

	As of September 30, 2011				As of December 31, 2010
Financial Instrument	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Cash and cash equivalents(1)	$	16,128	$	16,128	$	56,718	$	56,718
Tenant receivables, net(1)(2)	$	142,884	$	142,884	$	134,006	$	134,006
Accounts payable(1)	$	13,521	$	13,521	$	15,763	$	15,763
Interest rate swap agreements	$	—	$	—	$	691	$	691
Interest rate cap agreements	$	3	$	3	N/A		N/A
Line of credit and notes payable(2)	$	1,664,525	$	1,722,246	$	1,402,525	$	1,428,255

⁽¹⁾  For the periods presented, the carrying value approximates estimated fair value.

⁽²⁾  For the periods presented, the carrying value and estimated fair value includes assets and liabilities held for sale.

Piedmont’s interest rate cap agreements discussed in Note 6 above were adjusted and carried at fair value as of September 30, 2011, and Piedmont's interest rate swap agreement also discussed in Note 6 above was adjusted and carried at fair value as of December 31, 2010. The interest rate swap and interest rate cap agreements were classified as “Interest rate swap” liability and as a component of “Prepaid expenses and other assets”, respectively, in the accompanying consolidated balance sheets. The valuation of these derivative instruments, for both types of agreements, was determined using widely accepted valuation techniques including discounted cash flow analysis based on the contractual terms of the derivatives, including the period to maturity of each instrument, and uses observable market-based inputs, including interest rate curves and implied volatilities. Therefore, the fair values determined are considered to be based on significant other observable inputs (Level 2). In addition, as related to the interest rate swap agreements, Piedmont considered both its own and the respective counterparties’ risk of nonperformance in determining the fair value of its derivative financial instruments by estimating the current and potential future exposure under the derivative financial instruments that both Piedmont and the counterparties were at risk for as of the valuation date. This total expected exposure was then discounted using factors that contemplate the creditworthiness of Piedmont and the counterparties to arrive at a credit charge. This credit charge was then netted against the value of the derivative financial instruments determined using the discounted cash flow analysis described above to arrive at a total estimated fair value of the interest rate swap agreements. As of September 30, 2011 and December 31, 2010, the credit valuation adjustment did not comprise a material portion of the fair values of the derivative financial instruments; therefore, Piedmont believes that any unobservable inputs used to determine the fair values of its derivative financial instruments are not significant to the fair value measurements in their entirety, and does not consider either of its derivative financial instruments to be Level 3 liabilities.